Redundancy time-bomb in Work & Families Bill

Employers have voiced fears over a “buried” clause in the Work and Families Bill that would give the government carte blanche to impose an unlimited increase in statutory redundancy pay (SRP).

Clause 14 of the Bill gives the secretary of state the power “on one occasion only” to increase the weekly limit which applies in relation to SRP. This increase does not need to be related to changes in the retail prices index.

The clause is the result of promises made by Labour to trade unions under the Warwick Agreement, in which the government promised to “up-rate redundancy pay”. Unions have pressed for the current £280 a week to be doubled, leaving employers worried that the cost of redundancy pay-outs could rocket.

However, the clause has not been debated at all, having been overshadowed by arguments about maternity and paternity leave. Time is running out for any changes to be made – the Bill is due to reach its report stage and third reading in the House of Commons on Wednesday. At the third reading there can be no further amendments.

David Yeandle, deputy director of employment policy at manufacturers’ organisation the EEF, said the government had not given any real indication of what it intends to do.

“The impact of a significant increase in the cost of making redundancies is likely to result in companies having to make even more employees redundant than they had originally intended to meet these additional costs,” he said.

Tom Moran, senior policy adviser at the CBI, said that every £10 rise in redundancy pay added £30m of costs to UK employers and that a large rise would be unacceptable. “Whatever happens, this should not slip by unnoticed,” he said.

Further plans in the forthcoming age regulations could lead to more upheaval for employers, Moran added.

A spokesman for the DTI said the matter would be fully considered, but said the government could not speculate as to how much redundancy pay would rise.